Question

# Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical...

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 4,400 units of product were as follows:

 Standard Costs Actual Costs Direct materials 5,700 lb. at \$5.40 5,600 lb. at \$5.20 Direct labor 1,100 hrs. at \$17.60 1,130 hrs. at \$18.00 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,150 direct labor hrs.: Variable cost, \$3.10 \$3,380 variable cost Fixed cost, \$4.90 \$5,635 fixed cost

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

 Price variance \$ Quantity variance \$ Total direct materials cost variance \$

b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

 Rate variance \$ Time variance \$ Total direct labor cost variance \$

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

 Variable factory overhead controllable variance \$ Fixed factory overhead volume variance \$ Total factory overhead cost variance \$

a)

Price variance = Change in price * actual quantity

= (5.40 - 5.20)*5600 = 0.20*5600 = 1120 (F)

Quantity variance = Change in quantity * Standard price

= (5700-5600)*5.40 = 100*5.40 = 540 (F)

Total direct materials cost variance = 5700*5.4 - 5600*5.2

= 30780 - 29120 = 1660 (F)

b)

Rate variance = Change in rate * actual hours

= (17.60-18)*1130 = 0.4*1130 = 452 (U)

Time Variance = Change in hours* standard rate

= (1100 -1130)*17.6 = 30*17.6 = 528 (U)

Total direct labor cost variance = 1100*17.6 - 1130*18

= 19360 - 20340 = 980 (U)

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